Legal

Post furlough, is redundancy the only way to reduce headcount?

4 Aug 2020 By Charlie Maples

While many businesses are having to make staff cuts now, some are realising they may need more employees again soon. Charlie Maples explores some alternative options

Making staff redundant is a real loss for businesses. Not only is it expensive because of notice and redundancy payments, but it means letting go of employees the employer has invested in and who were often hard-won and recruited in the first place. Redundancies can also, regrettably, have a large impact on morale for those staff that remain. The employer feels these consequences all the more keenly when they suspect they may need some of those employees back again in six months' time. 

This has given rise to a hunt for alternatives to redundancy – and we have seen some interesting solutions bounced around or put up for agreement with affected employees/representatives. Let's unpick some of them.

Private furlough or sabbaticals

Although the coronavirus job retention scheme (CJRS) ends in October, some businesses are weighing up whether they might introduce a similar model themselves. Employees could agree not to work for an extended period of time (perhaps on lower pay than the CJRS), which might be attractive as an alternative to redundancy, especially if they can work elsewhere while on this 'private' furlough. This is a good option for employers that have some cash available, have employees who are skilled and/or need significant training, and who think the time lag to an upturn will be relatively brief for them.

Alternatively, employees might agree to unpaid sabbaticals or other time off while remaining employed, therefore preserving their continuity of employment and associated rights. 

Reducing guaranteed hours or working weeks

Firms could propose moving affected staff on to reduced minimum-hours or zero-hours contracts. Again, this way they are still employed, and their rights are preserved, but they have fewer or non-guaranteed hours. 

Businesses might also look at agreeing a temporary or permanent reduction in working days with all employees across the board – perhaps a 1970s-style three-day week, or an alternate week working pattern. If this is an option, they should consider how quickly they would want the ability to change this, and whether employees could work elsewhere on the remaining days, and what rules they would want to put in place around that.  

Salary reductions

Pay cuts that might be topped up depending upon company performance is also an option. Would some of your employees agree to significantly reduce their salaries in return for remaining employed and a promise to repay portions and/or a bonus if certain financial goals are reached?

Fast tracked re-recruitment 

For those employees who are made redundant, employers could operate a recruitment list to which you first advertise vacancies as and when they arise. The arrangement could include provisions for repayment of enhanced redundancy packages if the employee is re-employed within a specified time period. 

Secondments

Is there another business that you work with or know that has become busy as a result of the pandemic and might benefit from the temporary 'loan' of your skilled staff? Is there scope to supply temporary workers to other companies in your group or even externally as a business model in itself?

Consultancy and outsourcing

Do you have particular employees who could agree to shift on to commercial terms for the work that is still available, in return for foregoing their redundancy payment under a settlement agreement? Or, might you look to contract out or sell part of your business so that the jobs are transferred under TUPE regulations? 

All of these ideas need to be carefully thought through and, usually, some clear drafting before being offered out and agreed with employees as alternatives to redundancy. 

Charlie Maples is senior associate at Foot Anstey

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